The eight Ivy League universities agreed yesterday to stop a 35-year practice of matching the amount of each other's financial aid offers to individual students, settling a Justice Department suit that charges the practice violates antitrust laws.
The consent decree prohibits yearly meetings at which school officials discussed financial aid offers to students, partly to avoid bidding wars for the most desirable applicants.
The discussions ensured it would cost an applicant seeking financial aid virtually the same amount to attend any of the eight schools, thus illegally eliminating financial competition for students, the Justice Department said.
The settlement also forces the schools to drop a longtime agreement to offer scholarships only on the basis of financial need, not merit. Assistant Attorney General James Rill, in charge of antitrust investigations, said schools can adopt a policy of need-based scholarships individually but cannot agree to restrict financial awards.
"Students and their families are entitled to the full benefits of price competition when they choose a college," said Attorney General Dick Thornburgh. "This collegiate cartel denied them the right to compare prices and discounts among schools, just as they would in shopping for any other service."
The settlement ends the department's two-year investigation of financial aid offers, tuition increases and faculty salaries at Brown, Cornell, Columbia, Dartmouth, Harvard, the University of Pennsylvania, Princeton and Yale.
The department filed its suit and the consent decree simultaneously. Thornburgh said antitrust investigations are continuing against nearly 50 other private universities.
Massachusetts Institute of Technology, the only non-Ivy League school named as a defendant, chose not to sign the consent decree and plans to fight the complaint in court. MIT Provost Mark S. Wrighton said, "We do not believe our practices violated antitrust laws."
The heads of several Ivy League schools said they only reluctantly agreed to abandon their practice of sharing financial aid information, which they insist helped to fairly distribute scholarship funds. The annual meeting to discuss financial aid offers was canceled this year because of the antitrust inquiry.
The school officials said they agreed to settle the suit because of the legal costs of fighting the Justice Department. Beverly Ledbetter, vice president of Brown University, said the Justice Department's investigation alone cost the school $250,000 in legal fees. "We can't continue to spend time and money like this," said Dartmouth spokesman Alex Huppe.
Daniel Steiner, a Harvard vice president, said he believes the consent decree "will harm people. . . . We have already seen in other parts of the U.S. too much evidence of 'bidding contests' for students.
"There is a large amount of aid . . . going to students who have the money to pay. What this interpretation of the antitrust law means is that that trend will continue," Steiner said.
Harvard, Yale, Princeton and University of Pennsylvania all issued statements yesterday saying they were committed to issuing scholarships on the basis of need.
Thornburgh said, "The choice of whether to consider price when picking a school belongs to parents and students, not the college or university.
"Students may have been deprived of the opportunity to attend the . . . school of their choice because they were not offered as much aid as they would have been in absence of the conspiracy," Thornburgh said.
The department's suit did not charge the universities with fixing tuition prices or faculty salaries, although Thornburgh said he was "concerned" about possible antitrust violations in those areas, both at Ivy League schools and elsewhere. The cost of tuition and room-and-board at Ivy League schools tends to differ little: $20,655 this year at Harvard; $20,826 at Yale.
In one memo obtained by Justice Department investigators, officials of Wesleyan University in Connecticut predicted forthcoming tuition rates at six competing colleges to within one percentage point.
Thornburgh noted that the consent decree forbids the colleges from agreeing on tuition prices or faculty salaries, adding, "We're less concerned about what's been done in the past than what will be done in the future."
In signing the consent decree, the colleges did not acknowledge any violations of price-fixing laws. Their lawyers tried unsuccessfully to convince the Justice Department that the colleges should not be treated like ordinary businesses, subject to the usual rules of commerce.
"Schools like ours should not been seen as competitors in the same way that toaster manufacturers are," said Huppe, Dartmouth's spokesman.
But Thornburgh said, "The revered stature of these institutions does not insulate them from the requirements of the antitrust laws."
Special correspondent Christopher B. Daly in Boston and staff writer Kenneth J. Cooper and researcher Ralph Gaillard Jr. in Washington contributed to this report.